KFC and Pizza Hut operator Sapphire Foods India shares fell on Monday after the company's net profits declined in the March quarter. Despite the poor performance, brokerages are bullish on the stock mainly because of KFC’s scalability.

What Happened: The company's net profit fell to ₹2.03 crore in the quarter ended March versus ₹135.48 crore in the previous year—the fourth straight quarterly bottom line decline for the firm.

Revenue came in at ₹631.69 crore for the quarter, up from ₹560.4 crore in the previous year. KFC revenue increased 16% year on year in the quarter despite posting a 3% decline in same store sales. Pizza Hut's revenue shrank 3% with a same-store sales decline of 15%. Sri Lanka revenue grew 22.3% with a same-store sales growth of 4%. 

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Analyst Reactions: Nuvama Institutional Equities retained its "buy" call and increased the target price to ₹1,812. Analysts pointed out the outperformance of the KFC brand in FY24 which had 88 new restaurants, revenue growth of 18%, and EBITDA margin at 19.7%.

The brokerage pointed out that the management is confident of doubling the store count of the company by the end of 2024 from calendar year 2021. 

JM Financials also retained their "buy" call and increased the target price to ₹1,570. It is bullish on the company's approach to go aggressive on KFC which contributes 65% to company's revenue. The green shoots from the Sri Lanka business also augur well for the company, the brokerage added.

Price Action: Sapphire Foods stock fell over 3.68% to ₹1,365 in the morning session. 

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